Aisling, Clarus Crown Old Funds With Huge Royalty Deal

When was the last time a life sciences venture firm spent $50 million all in one go? It doesn't happen often. But in the past week, two firms did exactly that. Aisling Capital and Clarus Ventures announced Monday that they've each put up $48.5 million for a tiny slice of sales royalties from ibrutinib, a promising cancer drug that could receive FDA approval this calendar year or early next.

The firms joined Royalty Pharma to buy the ibrutinib royalty rights from Quest Diagnostics for $485 million, a deal first announced in mid-July without details of the VCs' involvement. (Quest obtained the rights when it bought Celera in 2011 for its diagnostics business.)

Royalty deals are happening more often, as we noted on this blog earlier this year, but this was an unusual deal for Royalty Pharma – and would be for any royalty fund – because the drug is not yet approved. Royalty investors, firms which pay up-front cash to scientists, institutions, biotechs and pharmas for royalty rights that they collect over time, don’t typically risk regulatory failure on top of commercial uncertainty. But Royalty Pharma has been more creative of late, even making an acquisition play for Elan Corp that was ultimately unsuccessful.

Royalty Pharma brought in the VCs to share the risk and to help assess regulatory and commercial uncertainties in the hematology-oncology space. (Clarus has people, including managing directors Nick Simon and Dennis Henner, PhD, who were executives at Genentech in the Rituxan era.)

For the VCs, investing from the end of their current funds with an eye toward new fundraising, it’s a less risky investment than they and their brethren are accustomed to. Sponsored by Pharmacyclics and Johnson & Johnson, ibrutinib has received “breakthrough” status from the U.S. Food and Drug Administration in three patient settings: chronic lymphocytic leukemia with a deletion of the chromosome 17, relapsed/refractory mantle cell lymphoma and Waldenstrom’s macroglobulinemia.

Even if ibrutinib garners multi-billion dollar sales at its peak, will it bring venture-like returns to Clarus and Aisling? Royalty Pharma officials recently told "The Pink Sheet" DAILY that the royalty stream they bought from Quest is in the mid-single digits as a percentage of total ibrutinib sales. We don’t know the exact number, so let’s call it 5%. Clarus and Aisling have each bought 10% of that stream; let’s call it 0.5% of total sales apiece.

Under that scenario, it will require nearly $10 billion in ibrutinib sales for each firm to recapture its investment; more than $19 billion to double it, and $29 billion to capture a “venture-like” 3x return.
Even by optimistic projections – last month, Barclays Capital estimated peak annual sales for ibrutinib between $2 billion and $3.6 billion, others have gone higher -- it will take years to reach those totals.

But the ibrutinib scenario could play out – and pay out – in two different ways. First, if ibrutinib is approved, the VCs will at least have a steady stream of returns to pass through to their LPs as soon as sales begin. Such near-term returns, however incremental, would be far less likely if each VC spread its $50 million among a few earlier-stage biotech companies or other investments.

Second, if ibrutinib is approved, the value of the royalty stream could jump. There are other investors, including other royalty funds, that don’t take pre-commercial risks. Eliminate those risks, and perhaps Clarus and Aisling could flip their royalty rights to new buyers. Aisling senior managing partner Dennis Purcell and Clarus’s Simon acknowledge both scenarios. “It certainly factored into our thinking,” says Simon. “We can hold for the entire the royalty period, and we also have the option to sell at some point once adoption of the drug establishes real commercial value.”

Seeing how Clarus and Aisling both are investing from the tail end of funds closed in 2008 and 2009, respectively, we'll speculate that there's a good chance this deal becomes, well, royalty speculation. We don't know the internal goals for the funds, but if ibrutinib is approved and buyers emerge, we wouldn't be surprised to see a flip of the rights for something less than a "venture-like" 3x return. As  Purcell notes, a big part of the venture equation these days is shortening the time from investment to liquidity.

Even with their big ibrutinib outlays, Clarus and Aisling say there's a little gas left in the tank for their current funds. Purcell says his group hasn't yet begun talking to LPs about raising a fourth fund, while Simon says Clarus is "actively contemplating" a third fund.

- Paul Bonanos contributed to this report. For more analysis of this deal and other avenues VCs are taking to find lower-risk returns, see our upcoming issue of START-UP.

Photo courtesy of flickr user Jodimu.

Financings of the Fortnight Keeps Its Dauber Up

Baseball fanatics out there might remember Roger Craig, a pitcher for the hapless expansion 1962 New York Metropolitans, then much later the manager of several memorable San Francisco Giants teams in the 1980s. As the San Fran skipper, Craig was a spinner of many homespun threads. The one that sticks with most Giants fans of a certain age was Craig’s catch-all pick-me-up: Don’t get your dauber down.

No one has yet to spot a dauber, much less one that’s down, but we all got the message. Baseball’s a long play, as you financial types might say. Don’t let the small sample sizes harsh your mellow. Case in point: DowJones VentureSource just released its first-quarter venture data, and everything, at first glance, is down: Money in (fundraising), money out (investment), and money recouped (IPOs and M&A activity). It was the lowest amount of venture investment in three years, and the fewest acquisitions since 2009.

That’s for all venture sectors; but there were bright spots in our little corner of the world. For example, a life-science specific VC survey from law firm Fenwick & West says in 2012 up rounds outnumbered down rounds 52% to 17%, an uptick from a 47%-25% ratio in 2011.

And despite increasing reluctance of life-science VCs to invest in new companies, the quarter’s second-largest fund raised was Third Rock Ventures’ new $516 million vehicle, its third (might we suggest T-shirts that say “III ROCK III”?). The folks at Fenwick have crunched fundraising data from DowJones and other sources and estimate that those earmarked for life-science investment are in decline, from $3 billion in 2011 to $2.5 billion in 2012. With Third Rock III – a pure life sciences play -- by Fenwick’s measure we’re already 20% of the way to last year’s total.

According to DowJones, biopharmaceuticals accounted for $938 million, about half the health care total, and right in the middle of the 13 quarterly totals rung up since the start of 2010. So take the overall venture drop with a spoonful of sugar: there have been far worse quarters in the past few years, such as the $583 million invested in Q1 2012. In fact, have a little more sugar: Broken down by industry subsector, “biotechnology therapeutics” beat out “online communities” as the biggest breadwinner with $476 million invested. (The gap between that and the $938 million attributed to “biopharmaceuticals” goes to show how much extra stuff, like diagnostics and specialty pharma, VentureSource lumps into the biopharmaceuticals category.)

With all the bustle in the IPO hedgerow the past two weeks, we think the VentureSource first-quarter overview seems prematurely grim. VentureSource tallied nine IPOs total, but that seems low. By our own count, there were seven through March 31 in health care alone, four of which were biopharmaceuticals. (Enanta, TetraPhase, KaloBios, and Stemline Therapeutics). Add to that this fortnight’s issues, Omthera Pharmaceuticals and Chimerix (see below), plus a burgeoning backlog of companies (Portola Pharmaceuticals, Epizyme, Receptos, and more) looking to break through to the public markets, and the outlook has begun to brighten. It’s not just the queue; it’s the fact that Chimerix broke the $100 million mark, a rare feat for a biotech IPO. Granted, it had help from existing investors, as did Omthera, but that’s been par for the course since the Great Recession receded. Nine digits is nine digits.

For all the venture capital that flowed into biotech this quarter, perhaps our favorite slice was the mere $15,000 that helped launch Cortera, the brain-child of students at the University of California, San Francisco. (Team leader Connie Cheung, whose winning presentation can be seen here, tells the IN VIVO Blog the name will soon change to Spiria.) They won a competition tied to the school’s entrepreneurship course, and the seed funding was provided by Burrill & Co., whose chief Steve Burrill is one of the course’s directors. The Spiria team says it has a brain-mapping system for neurosurgeons that’s faster and safer than established methods. If that holds true, they’ve got excellent timing; the National Institutes of Health is coordinating a brain-mapping effort, and GlaxoSmithKline has pledged to seed up to 20 academic labs doing early work that could lead to ‘electroceutical’ therapies, or the alteration of biological function through electrical pulses instead of chemicals or biologics. The latest edition of Start-Up will have a fuller explanation.

While you’re in a Start-Up mood, check out our colleague Stacy Lawrence's coverage of VCs doing rather un-venture-like things: funding late-stage drug trials on behalf of Big Pharma. The drug stays with the Pharma owner while the fees, milestone payments and (if all goes well) sales royalties flow to the VCs and their LPs. If the model grows beyond the handful of venture firms giving it a go, the metrics of venture exits might need re-thinking, because the entities the VCs set up to run the trial aren’t necessarily meant to go public or be acquired.

Finally, we send our thoughts and respect to the folks in Boston and West, Texas, each dealing with tragedy this week. Boston is home to much of our readership, and one effort to fundraise on behalf of the bombing’s victims and their families is getting a big push from the local tech and venture crowd, with an assist from the writers of Fortune’s Term Sheet. Thanks to all who refuse to get their daubers down.

And who knows, perhaps we’ll figure out what a dauber is by the time we get to the end of the latest installment of…

Cleave Biosciences: The early-stage oncology company has reeled in New Enterprise Associates to join its Series A syndicate, bumping the round that started in 2011 to $54 million without a clinical candidate in sight. NEA joins US Venture Partners, 5AM Ventures, Clarus Ventures, OrbiMed and Astellas Venture Management, as well as Osage University Partners, which joined later with a $2 million investment tied to its relationship with UNIV TK. (For more on the unique Osage strategy, click here.) Cleave was formed around three novel targets discovered in the Cal Tech lab of Raymond Deshaies, who co-founded Proteolix with USVP partner and Cleave board member Larry Lasky. Cleave’s initial Series A draw of $44 million and its exploration of protein homeostasis landed it a spot on START-UP’s 2011 A-List. It expects the Series A cash to last two or three more years and push a first drug candidate – not yet identified -- into the clinic. Other compounds addressing protein homeostasis have gained commercial approval for multiple myeloma, Millennium Pharmaceuticals’ Velcade (bortezomib) and Onyx Pharmaceuticals’ Kyprolis (carfilzomib), which came to Onyx when it bought Proteolix in 2009. Cleave will first pursue a proof-of-concept trial in multiple myeloma. Armed with its novel targets, however, the firm believes it can apply its compounds to solid tumors. NEA’s Robert Garland will take a seat on the board.– Lisa LaMotta

Anacor Pharmaceuticals: The Palo Alto, Calif. firm has had enough success discovering drugs with its boron chemistry platform that the Bill & Melinda Gates Foundation will fund new programs to discover treatments for two worm diseases and tuberculosis. The foundation will pay Anacor $17.7 million and take a $5 million equity stake, the latest biotech investment the world’s largest charitable group has made as part of a recent initiative. (Our Start-Up colleagues wrote about it here.) Beyond the programs for river blindness and elephantiasis, both caused by parasitic worms, and tuberculosis, Anacor will also use the Gates money to expand its library of boron compounds to screen for more neglected-disease treatments and open the library to the Gates Foundation and other nonprofit, governmental and academic researchers. Anacor’s lead compound is tavaborole to treat onychomychosis, a type of toenail fungus, and preliminary Phase III data were released earlier this year. The firm plans to file an NDA for tavaborole in mid-2013. The $22.7 million infusion from Gates nearly matches the largest fundraisings Anacor has managed since its 2010 IPO. In 2012 it raised secondary financings of $20 million and $23 million, and it has also brought in smaller amounts via private placement and alliance. – Alex Lash

Chimerix: No wonder the IPO pipeline keeps filling up. Conditions for new issues are improving, which allowed antiviral drug developer Chimerix to boost the number of shares in its offering while maintaining a strong price. Chimerix raised $107.4 million in its April 11 offering, selling 8.4 million shares at $14 apiece. The company had previously said it would aim to sell 6.1 million shares between $13 and $15 each, but it responded to high demand and fulfilled its underwriters’ greenshoe option by selling more shares within the same price range. The company will conduct Phase III trials on lead candidate CMX001, a broad-spectrum oral lipid conjugate of antiviral drug cidofovir (sold by Gilead as Vistide) to treat cytomegalovirus in patients who have undergone hematopoietic stem cell transplants. Chimerix is also investigating the drug to combat other double-stranded DNA viruses such as adenovirus, herpes simplex virus and BK virus, as well as smallpox. The company has a partnership with Merck around CMX157, another lipid conjugate targeting HIV. Chimerix shares rose 34% in their first day of trading to close at $18.79, and spent most of the week between $18 and $19.50. – Paul Bonanos

Auris Medical: The Swiss firm said April 16 it has attracted a chunky $50.4 million in a Series C financing, the most raised by a private biotech in Europe so far this year. With two Phase III-ready candidates for tinnitus and acute hearing loss, Auris has a pioneering position in new drugs for hearing disorders. The cash will be used to move them through to registration, the firm said. AM-101 is being developed for the treatment of acute tinnitus, and AM-111 for the treatment of inner ear hearing loss, and both have completed Phase IIb proof-of-concept studies. The compounds are formulated in a biocompatible gel and given by intratympanic injection, through the eardrum, and they then rely on passive diffusion to reach their site of action in the cochlea. Developing new otologic drugs hasn't attracted the same amount of attention as new ophthalmic drugs, even though hearing loss is more common than declining sight. The cochlea, or inner ear, is tiny and difficult to get at, and there are a plethora of hearing aids and implants already available to address the commonest hearing disorder, the age-related loss of hearing associated with a lifetime of loud noises and other adverse events. When Auris CEO and founder Thomas Meyer started out in 2003, he funded the company himself, and found it difficult to convince others of his seriousness. The new round shows his persistence has paid off, and other efforts have also recently emerged. The funds come from Paris-based Sofinnova Partners and US-based Sofinnova Ventures, two firms with common ancestry but which are otherwise independent of each other. – John Davis

All The Rest: GenSight Biologics closed a $40M Series A to support ophthalmic gene therapies… Syros Pharma raised $30M in a Series A for its work on novel gene control medicines… Allecra Therapeutics, a 2013 start-up collaborating with Orchid on overcoming bacterial resistance to antibiotics, completed a €15M Series A co-led by Edmond de Rothschild and Forbion... Dievini Hopp Bio Tech Holding provided a €13.9M Series E for topical drug delivery company Novaliq… Orphan drug accelerator Cydan raised $16M… InnoBio and Sofinnova Partners were the investors on neuro-metabolic-focused MedDay’s €8M Series A… Merck Serono Ventures led a £2.1M round for Canbex Therapeutics… Beat BioTherapeutics was seeded with $2.5M to fund a gene therapeutic for heart failure…Seraxis, working on cell therapies for Type I diabetes, raised an undisclosed amount in Series A financing… Boehringer Ingelheim Venture Fund reportedly provided Series B financing for Eyevensys… University of Copenhagen spin-off Avilex received seed funding from Novo Seeds… GI therapeutics company Synergy publicly sold $90M worth of common stock… Omthera grossed $64M in its IPO... Chemokine-targeting ChemoCentryx closed a $60M FOPO… Less than a year after completing an IPO, Durata Therapeutics raised $50M in a secondary offering… Oncology tests and services firm Cancer Genetics raised $6.9M in its IPO after postponing and refilling multiple times… ADMA Biologics, which reverse merged and became a public reporting entity via the Form 10 process, amended its IPO terms… Harvard Apparatus Regenerative Technology postponed its IPO… VistaGen raised $36M from a subsidiary of Bergamo Acquisition Corp. … RNAi platform company Silence Therapeutics completed a £19M PIPE… To support Phase IIb trials of diabetes candidate GFT505, Genfit raised €14.3M… Lincoln Park Capital Fund might invest up to $18.5M in Anthera, which also signed a $20M debt financing with MidCap Financial… MEI Pharma will use $15.2M in PIPE proceeds for lead candidate pracinostat for advanced hematologic malignancies… Jennison Associates invested $10.1M in Coronado Biosciences… OxiGene sold $5M in zero coupon convertible preferred stock… Resverlogix is spinning off RVX Therapeutics to focus on an epigenetics platform in autoimmune disease and cancer… StemCells got a $10M loan from Silicon Valley Bank. -- Amanda Micklus

Financings of the Fortnight Sees Signs That Point To Going Public

Oh, the siren song. The new year arrives, the buzz and handshakes at the JPMorgan conference get everyone hopped up, and a scramble of biotech IPO activity lights up the wires. In 2012 it was Verastem, Adocia, Cempra and Chemocentryx all going through the looking glass by early February. This year, the early birds are KaloBios Pharmaceuticals, Stemline Therapeutics, and Zoetis, the last being an outlier in that it’s Pfizer’s animal health products division, not a human biopharma, and it instantly zoomed to a $13 billion market capitalization. (If you’ve read The Omnivore’s Dilemma, by the way, you’re not likely to invest.)

Two diagnostics firms and an Israeli drug developer could also jump soon, and back on the mega-IPO front, there are stories afoot that Quintiles is eyeing the public markets. Whatever the actual fervor of behind-the-scenes activity, the leaks are a sign that the market is at least promising enough to float a trial balloon through the press.

After the initial flurry in 2012, however, the rest of the year brought about a dozen more IPOs. That same count in 2013 would be a disappointment. Sure, the U.S. government’s chronic can-kicking of fiscal cliffs, debt ceilings, and sequestrations means that we’ll probably never have the predictability markets crave, but the economy continues to creep forward, regulations are in place to (theoretically) make IPOs easier, and the FDA is approving more drugs than ever, except for 1996. No, really. The final count last year was 39 novel drugs; the only year in the PDUFA era with a higher total was 1996, with 56.

What’s more, the class of 2012 has had a strong post-IPO performance – shares up 41% mean, 36% median – which should give them the luxury of financing less frequently, according to a recent BMO Capital Markets analysis. In turn, that might free up more investor cash for new issues. That’s our own speculation. The thing is, a few high-profile biotechs recently have brought on board crossover investors who expect an IPO in the not-too-distant future. They really want to get deals done, and they're motivated to buy shares on the public side, too. Like the economy, it's not a slam dunk indicator of more IPO activity, but it's another potential factor to add to the mix.

One veteran biotech investor now in the thick of all this crossover action is Jim Tananbaum, and his new firm Foresite Capital just closed a $100 million fund. It already has six investments on its books, and we have the details below in our roundup.

We’ve discussed the crossover-biotech relationship quite a bit lately, and we bring it up again with regard to antibody developer KaloBios' new listing. Mutual fund giant Fidelity led its Series E round last May, about six months before KaloBios said it would attempt to sell 3.85 million shares for $12 to $14 apiece; it later  lowered the range to $8-$9. It sealed the deal February 1, selling 8.75 million shares at $8 apiece. (The upcoming Start-Up magazine will take a closer look at KaloBios’ winding path to the public markets.) The other biotech IPO this fortnight was Stemline Therapeutics, which closed its IPO of 3.8 million shares including the overallotment at $10 per share, netting $35.5 million. The firm had been on file since April.

It's been a winding path, perhaps even a long strange trip, just to get to this point in our every-other-weekly wordfest. Time to cross over to the other side of this snappy little JPEG, where you, dear reader, will find yourself soaking in the latest edition of...

Zoetis: Pfizer continued its march toward pharma-only status by debuting shares of its animal-health division, Zoetis, in an initial public offering on January 31 that raised $2.2 billion and immediately valued the new company at $13 billion. Since the start of 2011, Pfizer has sold off its formulation business Capsugel to private equity firm KKR for $2.4 billion and its nutritionals unit to Nestle SA for nearly $12 billion. The moves were set in motion by CEO Ian Read, who took the reins in late 2010 and put everything in the drug giant’s portfolio up for review. Pfizer retains an 80% stake in Zoetis, although analysts say it’s likely to divest the rest through a stock swap later this year to avoid taxes, a move similar to Bristol Myers Squibb’s IPO-fueled sale of its Mead Johnson Nutrition infant formula unit in 2009. Pfizer and its underwriters, led by JPMorgan Chase, Bank of America Merrill Lynch and Morgan Stanley, first aimed for a target between $22 and $25 a share. Zoetis sold 86.1 million shares at $26 apiece, and the price rose as high as $31.74 during the first day of trading. The stock closed February 6 at $31.01. – Lisa LaMotta

Bone Therapeutics: The Belgian regenerative medicine firm announced January 28 it has raised €7.7 million ($10.4 million) in a Series D funding round from current investors and regional bodies to support Phase III trials of its lead cell therapy, PREOB, in patients with osteonecrosis or non-union bone fractures. Like other clinical-stage private European biotechs, Bone Therapeutics is tapping its existing investment syndicate for a relatively small amount to fund a Phase III clinical study while it waits for a more benign investing climate. As our colleague Mark Ratner explained in the most recent issue of In Vivo, the field of cell therapy is undergoing a prominent evolutionary step right now as scientists reconsider the role cells play in the regeneration of tissue, but few large firms except for Shire have invested aggressively in the area. The financing includes €6.1 million from existing investors including Nausicaa Ventures, BAMS Angels Fund I and Life Science Research Partners and €1.6 million in grants from the Societe Regionale d'Investissement de Wallonie (SRIW) and Sambrinvest, both in the Walloon region of Belgium. Up to now, the company has raised around €30 million in funding since it was set up in 2006, including €18 million in capital and €12 million in grants and subsidies. PREOB’s production involves extracting mesenchymal stromal cells from patients' bone marrow, and treating and culturing them ex vivo using a proprietary method, so they develop into bone-forming cells, osteoblasts. These are then injected percutaneously into the necrotic or fracture region, avoiding the need for more invasive surgical procedures. "We think we are the only company pursuing osteoblast cells for therapeutic purposes in oesteonecrosis, whereas potential competitors are using differentiated bone stem cells,” CEO Enrico Bastianelli told our Pink Sheet DAILY colleagues. Osteonecrosis is a progressive degenerative disease of bone, most commonly seen in the hips of relatively young patients age 30 to 50 years. – John Davis

Ariad Pharmaceuticals: Fresh from the FDA’s accelerated approval of its chronic myeloid leukemia treatment Iclusig (ponatinib), Ariad raised $310 million, the latest in a series of follow-on mega-financings for for mid-tier biopharma companies. The firm sold 16.5 million shares at $19.60 each, with the cash going to help marketing and manufacturing of Iclusig, which is aimed at patients with a genetic profile associated with resistance to currently approved tyrosine kinase inhibitors. J.P. Morgan, Cowen and Co., and Jefferies & Co. led the underwriting. Iclusig was one of several oncology drugs in 2012 that earned FDA approval before their user fee date, a remarkable trend in a year that saw the most novel drug approvals from the agency since the mid-1990s. Ariad owns full rights to Iclusig, and CEO Harvey Berger said it will “move heaven and earth” to get it approved next for front-line CML by the end of 2014 before generic versions of Gleevec (imatinib), the breakthrough therapy for the indication, hit the market. It remains to be seen, then, how much Ariad will spare for its other pipeline candidates from the follow-on bounty just raised. In October the firm reported Phase I data for AP26113, its dual ALK/EGFR inhibitor, at the European Society of Medical Oncology meeting, and noted that patients on the drug did not develop the rash typically produced by EGFR inhibitors. AP26113 is designed not to inhibit “native” EGFR, which is widely expressed in normal tissue like the skin. – Alex Lash

Foresite Capital Management: A bit of fund news comes this fortnight from a grizzled industry veteran. Jim Tananbaum was among the founding partners at Prospect Venture Partners’ second and third funds in the 2000s, and the decade before that, he founded GelTex Pharmaceuticals and sold it to Genzyme for $1.6 billion. Now his investment firm, Foresite, has closed its first fund with $100 million committed. It’s already made six investments: AcelRx Pharmaceuticals, Intarcia Therapeutics, Keryx Biopharmaceuticals, Puma Biotechnology, Solta Medical, and Tarsa Therapeutics. Two of those companies have been in the news recently. Puma rewarded its shareholders with an unusual path to a New York Stock Exchange listing last year. It used the Form 10 pathway, reverse-merging into a public company shell, then making a pit stop on the bulletin boards on its way to the Big Apple. Intarcia, developing an implantable version of type-2 diabetes drug exenatide, attracted a huge mezzanine venture round last November: $160 million in equity, $50 million in debt. We assume it’s mezzanine, because it featured a host of cross-over investors who, as has become more common in biotech, are looking for late-stage private companies that will be ready to go public fairly soon. New to Tarsa, Foresite led its Series B round in 2012; at the time the firm already had in hand a Phase III oral candidate to treat osteoporosis, but the drug class, recombinant salmon calcitonin, is drawing regulatory scrutiny for possible ties to cancer. – A.L.

All of the Rest: In an extension to its February 2011 Series D financing, Ocular Therapeutix (ophthalmic drug hydrogel delivery) raised an additional $9.8mm tranche for a total round of $23.8mm… In what appears to be its Series C round, cancer, infectious disease, and biodefense vaccine developer Aduro Biotech has brought in $6.5mm… Connecticut Innovations has backed CyVek’s $5.5mm Series D round to support commercialization of its immunoassay technology, CyPlex, a biomarker analysis platform with applications in life sciences, drug discovery, and clinical research… Baxter Ventures participated in a $2.7mm Series A round for start-up Zytoprotec GmbH, a start-up developing peritoneal dialysis solutions and cytoprotective peptide treatments... MentiNova, which has filed an IND for an oral medicine for Parkinson’s symptoms, has raised $500k in early-stage capital from Foundation Venture Capital… German biotech Apceth received funding to accelerate the progress of its first cancer therapeutic, Agenmestencel-T, which uses a patient's own modified adult mesenchymal stem cells… Recently formed Avillion, with a business plan to partner with biopharmas to co-develop and finance late-stage therapeutics, closed an initial financing round through Abingworth and Clarus… Through a private placement, publicly traded Champions Oncology grossed $9.3mm… Nasdaq-traded Israeli biotech BioLineRx brought in $8mm with a private offering of units… Public NanoViricides raised $6mm through a private placement to fund clinical trials of its influenza vaccines… Concurrent with a reverse acquisition for a public listing on the OTC BB, cancer treatments company DelMar Pharmaceuticals completed a $5.4mm PIPE… First planning to bring in money through a FOPO, but later deciding on a private offering, Canadian company Immunovaccine hopes to gross $2mm to support preclinical/clinical trials of infectious disease candidates… Antibody developer Celldex Therapeutics netted over $83mm in its public offering of 12mm shares at $7.50… Keryx Biopharmaceuticals is putting its $70mm in FOPO proceeds into continued studies of iron-based compound Zerenex (ferric citrate), which has completed a US Phase III trial for treating elevated phosphate levels in end-stage renal disease patients… NewLink Genetics will apply the $42.8mm raised in a public offering to progress its clinical-stage cancer pipeline… Anthera Pharmaceuticals (candidates for inflammatory conditions including cardiovascular and autoimmune diseases) netted $37.6mm in a FOPO of 60.6mm shares at $0.66… A follow-on for GI-focused Ventrus Biosciences brought in $20mm… Transdermal drug delivery firm Echo Therapeutics netted $9.5mm in a FOPO… Tel-Aviv-traded Can-Fite BioPharma, in a public offering of units, raised $7.2mm… An at-the-market financing garnered almost $4.5mm for Navidea Biopharmaceuticals to fund further development/launch of cancer and CNS radiopharmaceutical imaging agents including Lymphoseek (technetium tc 99m tilmanocept), NAV4694, NAV5001, and RIGScan… Through an offering of common stock and warrants, Opexa Therapeutics raised $3.25mm to support continued trials of Phase IIb MS vaccine Tcelna... Research-focused Pacific Biosciences completed a $20.5mm debt offering through Deerfield Management to support continued adoption by biological research firms of its SMRT sequencing technology… Deerfield also led a $15mm debt offering for Flamel Technologies to advance its R&D pipeline of drugs formulated with its Medusa and Micropump delivery technologies... Nutritional supplements company MusclePharm completed a $3.5mm RDO of convertible preferred shares led by the Frost Group… In an SEC filing, cardiovascular device maker Covidien restated its previously announced intent to spin-off its Mallinckrodt pharma business.

Photo courtesy of the U.S. Navy.

Financings of the Fortnight Climbs Half Way To The Stars

Yeah yeah. We know. The life science venture shakeout isn’t over yet. It’ll get smaller before it gets bigger. Happy new year, everybody. That was the drumbeat we heard as we made the rounds at J.P. Morgan this week. But the California sun was shining, the street musicians were banging on their plastic buckets, and the doors of the St. Francis (don’t call it the Westin!) just kept on revolving.

Let us throw a few names at you. Sanderling Ventures. Alex Denner. Ascension Health. Hatteras Venture Partners. Shakeout notwithstanding, all have raised or are raising new health care funds, some by notable means. Hatteras is boosting its fund size 50% to $125 million by adding Small Business Administration loans under a new venture-friendly government program. 

Sanderling Ventures, whose last fund was of 2004 vintage – so long ago uncorked it doesn’t even register on START-UP’s latest annual gas-tank chart -- has laid down a marker that it’s looking to raise a seventh fund of $250 million, and GlaxoSmithKline says it will be a limited partner with a $50 million stake.

The venture arm of Ascension Health, one of the largest hospital groups in the US, has raised a third fund of $225 million. And Carl Icahn’s former biotech consigliere Alex Denner is also launching his new hedge fund, friends of FOTF tell us.

But the fund news we found most intriguing was that apparently CMEA Capital of San Francisco is giving an eighth fund a go, and it might be life-sciences only. We’re not sure of the details – and CMEA isn’t talking – but we do know this: two new partners with biotech experience have been dubbed "founding partners" of CMEA 8. It says so on the firm’s Web site. One is Kent Hawryluk, who has been an Indianapolis-based VC with Twilight Venture Partners for years. He helped found Marcadia Biotech in 2006 and sell it to Roche in late 2010 for nearly $300 million upfront. The other is Troy Wilson, who was president, CEO and co-founder of Intellikine until Takeda bought it about a year ago for up to $310 million.

With CMEA maintaining radio silence despite our entreaties, we’re left to speculate about the verbiage on Hawryluk and Wilson’s CMEA pages: 

“Our success at Marcadia is a reproducible formula for the portfolio companies of CMEA 8. We focused on transforming breakthrough science into a product needed by patients and Pharma. It was through capital efficiency, proper incentives, and hard work we were able to create value in such a short amount of time.”

And…

Wilson’s most recent success illustrates the strength of the CMEA 8 model. He was President and CEO of Intellikine, a company he co-founded. In just over four years, Intellikine discovered three drugs to treat cancer and advanced them into clinical testing… Along with several of his Intellikine colleagues, he recently co-founded Wellspring Biosciences. “It’s exactly the sort of company we want in CMEA 8,” he says.

Wellspring, by the way, is developing small molecules for cancer treatment, according to its bare-bones Web site.

Last we heard news from CMEA, it was launching the Velocity Development Corp. in 2011, a virtual development team for asset financing, as a carve-out of its seventh fund. In an earlier permutation, Velocity was supposed to be backed by Eli Lilly & Co. as part of Lilly’s “mirror fund” scheme, but instead it launched in mid-2011 as part of CMEA’s portfolio. Around the same time, Atlas Venture created its own asset-financing group, the Atlas Venture Development Corp. AVDC since has announced two projects, Arteaus Therapeutics and Annovation Biopharma, and in the following months, other asset-based venture schemes have debuted.

All the while, Velocity has been quiet. In discussing Velocity at the time of its launch, CMEA managing general partner Jim Watson, one of the San Francisco firm’s high-tech investors, said there would be no CMEA 8. Plans apparently have changed.  

A lot has certainly changed for Kleiner Perkins Caufield & Byers partner Risa Stack. On January 7, Stack said she was taking a position as a general manager and a primary deal maker for General Electric's healthyimagination, a $6 billion initiative to make health care affordable and accessible. Stack will develop strategy and drive execution of new initiatives with an initial focus on personalized medicine and health care data, her areas of expertise at KPCB.

Stack already was on the healthyimagination advisory board, and the initiative’s CEO Sue Siegel is a long-time friend and colleague, having worked at Mohr Davidow, a frequent co-investor with Kleiner Perkins in diagnostics.  Stack worked closely with co-founder Brook Byers, who also was heavily involved in many of her portfolio companies. (Byers is Kleiner’s board representative at Foundation Medicine, which just extended its Series B round – see item below.)  Several of Kleiner Perkins’ diagnostics portfolio companies, including Foundation, CardioDx and Veracyte, are in the early phases of product launch.  And with technologies abundant – even fungible, some say – it makes sense to look to integrators like GE to drive adoption.

Raise a fund? Ha. We at FOTF HQ can barely raise our fingers to the keyboard to write this column after four days of pounding the San Francisco pavement. Fortunately, there's nothing better to elevate one's chi and center one's chakras (we are in California, after all) than the year's first edition of...

Foundation Medicine: Coincidence? In Vivo Blog readers name Foundation Medicine’s Series B round their top financing deal of the year. Four days later, the company reveals it’s grabbed the attention, and cash, of three renowned investors who have added $13.5 million in new capital to push the Series B total to $56 million. Microsoft chairman Bill Gates, jVen Capital founder and former Digene chief Evan Jones, and Russian billionaire Yuri Milner topped off the round, following a September 2012 first closing that featured crossover investors Deerfield Management, Redmile Group and Casdin Capital; strategic backers Roche Venture Fund and WuXi Corporate Venture Fund; and VCs Third Rock Ventures, Google Ventures and Kleiner Perkins Caufield & Byers. The latest cash infusion arrives as Foundation continues to commercialize its first product, FoundationOne, a genomics test that oncologists use to choose appropriate treatments or clinical trials for cancer patients based on assays of their tumors. Foundation struck at least seven pharma partnerships during 2012, and it is planning to launch a hematologic malignancies test in 2013. Gates invested on his own rather than through his foundation, as he did in a 2011 round for Nimbus Discovery. Milner, known for his late-stage investments in Facebook, Twitter and Zynga, recently took a stake in 23andMe. And Jones, who has backed Veracyte, Fluidigm and CAS Medical Systems, took a board seat at Foundation. – Paul Bonanos

Ultragenyx Pharmaceutical: Last summer, START-UP posed the question “Was Enobia’s Sale A High-Water Mark For Rare Disease Deals?” Rare disease company Ultragenyx is trying to make that question look silly. The Northern California firm with close ties to rare-disease leader BioMarin Pharmaceutical said on December 20 it has raised a $75 million Series B round. It was led by Adage Capital Partners and featured a varied roster of heavyweight crossover public investors, corporate venture groups and its existing venture backers. The cash will go mainly toward the biotech’s lead clinical programs, UX-001, a Phase II replacement therapy for hereditary inclusion body myopathy, and UX-003, an enzyme replacement therapy to treat  mucopolysaccharidosis type 7, due to enter a Phase I/II trial this year. The cash also likely means that Ultragenyx will look to go public in the not-too-distant future, often a requisite to entice public investors to make private biotech investments, as our colleague Stacy Lawrence explained in a November START-UP feature. (For more crossover coverage, check out the new In Vivo magazine, in which Stacy has drawn back the curtain on Deerfield Management, which wants to become unequivocally the top health care hedge fund.) Despite the influx from global funds like T. Rowe Price, Blackrock and Jennison Associates, and the inclusion of rare-disease heavyweights Shire and Sanofi-Genzyme Bioventures, one of Ultragenyx’s original backers has the board chair: Eran Nadav of TPG Biotech. TPG and Fidelity Biosciences led the company’s $45 million Series A round – which landed it on START-UP’s 2011 A-List, by the way. – Alex Lash

Labrys Biologics/Solstice Biologics: By lumping two companies together, we don’t mean to imply they are two versions of one concept or two products spun out of one platform. On the contrary, they’re quite different. But they have the same lead Series A investor, venBio, and therein lies the rub. Labrys – $31 million committed, syndicate also includes InterWest Partners, Canaan Partners and Sofinnova Ventures – is a single-asset bet, an antibody to treat chronic migraine pulled from Pfizer’s shelf that should start Phase II this year; that’s the kind of idea venBio mainly was formed to go after. But Solstice – $18 million, and Aeris Capital joins venBio – is a bold technological idea, a reworking of RNA strands to help deliver their therapeutic promise into all kinds of cells. To date, constraints on delivering nucleic acids as drugs have limited the field to a few clinical applications. If Solstice’s RNA engineering works – a big if, as venBio cofounder Corey Goodman told "The Pink Sheet" Daily – it could crack the field wide open and justify the leeway venBio LPs gave Goodman’s team to seek out one or two early stage deals. Meanwhile, Labrys is to some extent a bet on Goodman’s drug connoisseurship. He ran Pfizer’s San Francisco biotech group for a couple years before the Wyeth merger shut down the group, and he was well acquainted with the migraine antibody. When Pfizer decided to outlicense it in early 2012, Goodman joined the competition quickly. – A.L.

Sarepta Therapeutics: On the heels of 48-week extension data from a Phase IIb trial in Duchenne muscular dystrophy (DMD) patients, Sarepta priced an underwritten public offering Dec. 13 netting the company $118.2 million. The Cambridge, Mass., firm announced it would offer more than 4.95 million new shares of common stock at $25.25 per share, a slight discount from its same-day closing price of $25.44. The raise capped off a turbulent 2012 for Sarepta. The company had an unclear future after 24-week data from eteplirsen’s Phase IIb trial in DMD produced mixed results. The share price sank as low as $3.24 in December 2011, adjusted for a subsequent reverse stock split, and the firm risked being de-listed by NASDAQ. Gains in early 2012 eroded gradually, and shares neared a new low as recently as July. However, a turnaround began that month as Sarepta engineered a six-for-one reverse stock split to bolster its share price. Then, in short order, it released impressive 36-week and 48-week data for eteplirsen. In the aftermath, Sarepta’s share price soared, peaking at $45 in early October. The improved trial results also brought about major interest in the company from institutional investors, Sarepta CEO Chris Garabedian said. They make up a large majority of the offering’s investors, he said, which comes after an at-the-market facility brought in $37.8 million after the 36-week data were released. -- Joseph Haas

The Best of the Rest: HealthCare Royalty Partners provided Nuron Biotech with $80 million in equity and royalty financing… Russian VC RusnanoMedInvest participated in venture rounds for Regado Biosciences ($51 million), Marinus Pharma ($21 million), and Lithera ($20.6 million)… Naurex completed a $38 million Series B round led by Baxter Ventures...Allakos raised $32 million in Series A funds to support work on immuno-inflammatory antibodies... for its FANG cancer vaccine platform, Gradalis pulled in a $24 million Series B… health IT company Within3 raised $20 million… NeRRe Therapeutics closed an $18.4 million Series A and got rights to GSK’s neurokinin antagonists… To further its anti-diabetic agent imeglimin, Poxel raised $17mm in Series B financing… NanoDimension led a $16 million Series B for Blend Therapeutics… GoBalto raised $12 million in a Series B round to support cloud-based software that simplifies clinical trials… TPG Biotech provided Trevi Therapeutics with $10 million in Series A financing… Avaxia Biologics pulled in a $6.4 million Series B to advance gut-targeted therapies… Actinium Pharma raised $5.1 million as part of a $20 million offering  prior to going public via a reverse merger… Tackling hypertrophic cardiomyopathy, Heart Metabolics closed on a $4 million Series A round… Tau Therapeutics collected $3 million to develop T-type calcium channel inhibitors for solid tumors… Transcriptic reportedly crowdfunded its seed round with help from AngelList and SecondMarket… Troika Venture Capital provided undisclosed financing to cancer metabolism firm StemPar Sciences… Rare disease player Synageva closed on a $118 million FOPO… A few weeks after signing on Leica Biosystems to create a companion dx for its NeuVax breast cancer candidate, Galena publicly raised $24 million… The regenerative medicine company Cytori Therapeutics completed a $20 million public offering… Targeting bioactive signaling lipids, Lpath finalized a $12 million follow-on… In a deal with Aspire Capital, Cyclacel raised $20 million… Nymox collected $15 million in a private placement to pay for trials of NX1207 in BPH and prostate cancer… Seaside 88 has provided NanoViricides with $5 million… Tonix Pharmaceuticals closed on a $3.4 million PIPE… Cancer Genetics set IPO terms at 5 million shares for $6-8… Stemline Therapeutics upped its planned IPO offering to 2.3 million shares at $10-12... Audeo Oncology postponed its IPO… To fund Procysbi commercialization, Raptor Pharma got a $50 million loan from HealthCare Royalty Partners… Oxford Finance loaned Agile Therapeutics $15 million… Arno Therapeutics raised an additional $2.15 million in convertible debt on $12.7 million initially collected in November… To help pay for its acquisition of cancer-trating laser equipment, Pinnacle Biologic received an undisclosed amount of debt financing... ADMA Biologics received $6 million in debt financing from Hercules Technology Growth Capital… Abbott officially spun off the biopharma unit AbbVie…and nine months after START-UP wrote about it here, Wellcome Trust launched a £200 million evergreen fund. -- Amanda Micklus

Photo of Powell Street in 1959 courtesy of Roger4336. He took it himself. Please note the previous location of Lefty O'Doul's. It has since moved.

Financings of the Fortnight Says It's Not Ova Til It's Ova

A two-year-old biotech trying to get listed on the over-the-counter exchanges wouldn’t normally qualify for much notice. But OvaScience is different. First, its founders include Christoph Westphal, who has co-founded and either sold or taken public several companies. The OvaScience CEO is Michelle Dipp, also a co-founder, as well as a partner with Westphal in Longwood Fund. Working together, their biggest coup was the sale of Sirtris Pharmaceuticals to GlaxoSmithKline for $720 million in 2008, and they also raised a few eyebrows while still at GSK for their side project selling dietary supplements related to Sirtris’s compounds.

OvaScience, which aims to start a pivotal trial by the end of this year for its fertility enhancement product, Augment, has gone public via a route normally traveled by shell companies to attract reverse mergers, using the SEC’s Form 10. Touted by some as a new alternative to burdensome and uncertain IPOs, the route hasn’t attracted many operating companies to date. If approved via Form 10, a company has the same disclosure rules as those that undertake an initial public offering, but its shareholders don’t have anywhere to trade until it can get listed somewhere.

That’s OvaScience’s situation.  In its latest SEC filing, the company says it’s shooting for an over-the-counter listing, but makes no guarantee of attaining it. It’s contractually obligated to try; its shareholders signed on with the expectation of liquidity at some point in the not too distant future. The list of shareholders includes OvaScience’s largest institutional investors, Bessemer Venture Partners, Longwood Fund, Fidelity Investments, and General Catalyst Group, but also dozens of individuals, some of whom are biotech boldface names. For example, Skyline Ventures’ John Freund and his wife Linda Grais, a former InterWest partner and currently CEO of Ocera Therapeutics, hold more than 5,000 shares in a trust; Dicerna CEO Doug Fambrough, also a former VC, owns 1,000 shares; Alnylam Pharmaceuticals top dogs John Maraganore and Barry Greene each have 3,636 shares. (Alnylam is one Westphal’s babies, which he helped take public in 2004.) The full list is here.

Westphal and Dipp were among the cofounders of Verastem, which managed to go public in January in a risk-averse market despite its cutting-edge science targeting cancer stem cells and early-stage pipeline (nothing even in the clinic). This time, however, they’ve eschewed the IPO process for a route that proponents say makes a lot more sense. “The beauty of the Form 10 strategy is that you’re custom-building the public company in a more rational way,” says William Hicks, an attorney at Mintz Levin Cohn Ferris Glovsky and Popeo in New York. “You’re not going through the SEC review process hoping to raise the money. You’ve already raised it.”

One limitation of the Form 10 process is having enough crossover investors – those who usually invest in public companies but have the capacity to make private investments – to support a deal. One such crossover is RA Capital in Boston. “It’s nice for a company when it has enough support from investors willing to do a deal before the company has a stock symbol,” says Peter Kolchinsky, managing partner of RA Capital, which owns 3.1% of OvaScience stock. “They know it will file the paperwork and get liquid, but they don’t need to get liquid right away."

Given the friends-and-family flavor of the investor list, it's no surprise to see RA on it. It was founded by and sports the initials of Rich Aldrich, now one of Westphal and Dipp’s partners at the Longwood Fund. RA crossed over to buy into OvaScience’s $35 million Series B round, and bought again in a small private placement OvaScience offered in August 2012 after it had become public. The placement, which raised only $4 million, was mainly a way to build a shareholder base and reach toward the minimum requirement needed to list on a major exchange. For now, however, OvaScience hopes to list over the counter, which should afford its investors some measure of liquidity if they’re inclined to sell. Seeing how the investor base is handpicked, it’s unlikely shareholders will rush for the exits. The firm is gearing up to test its lead product and, because it uses autologous material -- a woman’s own mitochondria extracted from her egg precursor cells and inserted into her eggs during in vitro fertilization (IVF), to potentially boost the odds of conception -- the company claims it won’t need FDA approval. The same won’t be true of a second product OvaTure that hasn’t yet begun preclinical development.

It remains to be seen if the Form 10 route becomes fertile ground for biotechs seeking wider capital access. OvaScience looks like it's on its way, but how many others can scramble through the side door with the help of dozens of friends in high places?

Had your fill of bad puns? You'll only egg us on by reading the latest edition of...

StemCells Inc: The San Francisco Bay Area company has been awarded a second $20 million grant from the California Institute for Regenerative Medicine (CIRM) under its Disease Team Therapy Development Award program. As reported in “The Pink Sheet” DAILY, the money will support pre-IND development of adult neural stem cell technology for the treatment of Alzheimer’s disease. HuCNS-SC, which consists of purified neural stem cells derived from human brain cells, is an allogeneic treatment, administered as a direct transplant to the hippocampus, the spinal cord, or the eye during a single procedure. The grant, announced September 6, comes a few months after CIRM awarded StemCells $20 million to support the pre-IND activities of its HuCNS-SC cells in patients with cervical spinal cord injuries. Both grants are based on the expectation that StemCells will file INDs for both indications within four years. The grants will help the company move the programs forward; currently, StemCells has about $18 million in cash on hand and expects to burn cash at a rate of $18 million to $20 million annually. Data in Alzheimer’s were presented in mid-July at the Alzheimer’s Association International Conference in Vancouver, but the grant has been delayed as the company needed to prove to CIRM that the treatment does in fact migrate deep into the brain. Data showed that treated mice had significantly improved memory and recognition of their surroundings compared to untreated mice. According to StemCells, the money will start coming the next few months after its financials have been properly vetted by CIRM and terms of the grant have been negotiated. – Lisa LaMotta

Sanofi: When Sanofi bought Genzyme in early 2011 for $74 per share after a long pursuit, the book wasn’t quite closed. Part of the deal value included contingent value rights – one of a multitude of recent biotech buyouts that featured earn-outs – tied to the commercial prospects of Genzyme’s not-yet-approved multiple sclerosis therapy Lemtrada. Today, Sanofi is clearly less skeptical about that drug’s prospects than when it originally signed its $20 billion acquisition, and it said September 4 it wanted to buy back some of those CVRs while they’re still relatively cheap. The Genzyme CVRs were floated on the Nasdaq in late March 2011, and they trade under the words-with-friends friendly GCVRZ symbol. Sanofi wants to buy 86,766,040, or about 30% of them in a modified Dutch auction process that would value the biobucks somewhere between $1.50 and $1.75 per share.  A modified what? Essentially Sanofi will let holders tender their shares at any price in that 25-cent window. It will buy up to 86,766,040 of them, and price the offering at the lowest possible price that allows them to pull in that number of shares. (Once the process is complete, Sanofi will pay the same amount for each CVR, the price at which the 86,766,040th cheapest share was tendered.) Buying some of the CVRs now – there’s potentially $13 per CVR left to be paid out, but only a dollar of that is attached to pre-commercial Lemtrada milestones – could cost the French pharma from $130 million to $152 million, a 7% to 25% premium to the shares’ pre-announcement value. But the offer allows Sanofi to save a little cash in the longer term should Lemtrada win FDA approval and begin to rack up sales. Prior to the Sanofi announcement, the GCVRZ shares were trading at $1.40. They quickly shot up in value and are trading at $1.72 as of the end of September 6. The tender offer expires at 5pm Eastern on October 5. Dutch auctions in biotech sound familiar? Not too long ago WR Hambrecht & Co. was marketing its own version of the process under its OpenIPO brand, a path followed by companies like New River Pharmaceuticals and Avalon Pharmaceuticals. – Chris Morrison

Avalon Ventures: San Diego-based hybrid venture firm Avalon is attempting once again to close a fund $50 million larger than its previous vehicle. The firm disclosed in an August 30 SEC filing that it has raised the first $202 million of Avalon Ventures X, a proposed $250 million fund which would be its largest yet. It’s been just 20 months since Avalon closed its $200 million ninth fund in January 2011. That exceeded the firm’s $150 million goal, which would have matched its 2008-vintage eighth fund. The firm has enjoyed some lucrative exits lately: It had stakes in vaccine developer BioVex, sold to Amgen in 2011 for $425 million up-front, as well as Amira Pharmaceuticals, for which Bristol-Myers Squibb paid $325 million up-front later the same year. Avalon traditionally splits its funds 50-50 between life sciences and tech; the firm’s biggest recent exit arrived from the IPO of online game developer Zynga. The firm has been a holdout among hybrid firms as some other VCs have split their teams or funds in order to focus on either tech or life sciences individually. Avalon is also known for taking early stakes in life sciences start-ups and running them itself as virtual companies for a couple of years before bringing in senior management, a strategy we explored last year in START-UP’s Capital Matters column. Key partners Kevin Kinsella and Jay Lichter didn’t respond to a request for comment, so we’ll have to wait and see when the firm tops off the tank. – Paul Bonanos

Aerpio Therapeutics: This Cincinnati-based spinout of a spinout said August 30 it has raised $27 million in a Series A round to push forward a drug for diabetic macular edema, a disease characterized by leakage of blood proteins into tissues behind the macula of the eye, causing a thickening of that tissue. DME is the leading cause of vision loss in diabetics. The round was led by Novartis BioVentures and joined by Venture Investors LLC, Triathlon Medical Ventures, Kearny Venture Partners, Athenian Venture Partners and AgeChem Venture Fund LP. All were previously investors in Akebia Therapeutics, itself spun out from Procter & Gamble five years ago. Both companies are run virtually and share a CEO, Joseph Gardner, who told “The Pink Sheet” DAILY that the money will fund a Phase Ib/IIa trial of AKB-9778, a Tie-2 activator that works by inhibiting human protein tyrosine phosphatase beta, an enzyme which counteracts vascular leakage to restore Tie-2 signaling. The 28-day dose-escalation study will begin in September and will test the safety and tolerability of ‘9778 in 30 patients with DME. Gardner said the company also is hoping to see strong signs of efficacy including decreases in retinal thickness and improvements in visual acuity. Results from that study are expected next spring. Once the Phase Ib/IIa study has been concluded, the remainder of the funds raised will be used to fund a second Phase II study with 100 patients “that will get the attention of partners and make future financings a bit easier in this dry funding environment,” said Gardner. Results from this trial are expected in 2014. – L.L.

Eggcellent photo courtesy of flickr user Ecstatic Mark.